Market Close: Major Acquisition spoils the day !!!

Rising inflation hits the sentiments of the investors and they chose to book profits at higher levels. The market shed its gain in the early sessions and plunged into the negative territory. Global cues were mixed and nothing to settle on. The Indian markets were largely down due to pressure on the index heavy weights. None of the other sectors were spared from profit booking. Budget is ahead by the end of the month and that is also seen as one of the reason for profit booking by the investors as they prefer to play safe in the market. Good Industrial and Manufacturing growth couldn?t help the market to recover from the free fall. Hindalco, BHEL and Ambuja Cement emerged as the top losers on the Sensex. Markets did not spare the Mid and Small caps as they too succumbed to selling pressure. Mid cap index ended down by 4% while Small cap index also down by 5%. European markets traded in the red zone.

Sensex ended down by 348 points at 14190.7. Weighing on the Sensex were losses in Hindalco (149.45,-14 percent), BHEL (2345.2,-6 percent), Guj Ambuja (132.15,-5 percent), RCVL (455,-4 percent) and Rel Energy (534.7,-4 percent). Losses were restricted by gains in HLL (203.3,+0 percent), Hero Honda (727.85,+0 percent).

Hindalco, India's largest non-ferrous metals company with a 60% domestic market share is planning to buy Novelis, the world's leading producer of rolled aluminium products for US$ 6 bn. in an all cash deal. The deal will create the world's largest aluminium rolling group providing cost synergies to Hindalco as it is one of the biggest producers of primary aluminium in Asia. The combined entity will also create an integrated aluminium player with low-cost metal sourcing from India and access to some of Novelis' biggest customers like Coca Cola, General Motors etc. The deal will give Hindalco an entry into value-added aluminum products. The US$ 6 bn imputed value of Novelis includes a cash payment worth US$ 3.6 bn to Novelies' shareholders and debt worth US$ 2.4 bn. While US$ 2.8 bn of the funds required will come from recourse financing and the balance US$ 0.8 bn will come from Hindalco and group company Essel Iron Ore Mining. Nothing much can be commented right now and wil have to wait till the deal is finalized. The stock was down by almost 14%.

Vodafone has won the bid for Hutchison Whampoa's 67% stake in the Hutch-Essar. Vodafone won the bid by an offer of $19.3 billion i.e. around $794 per subscriber to clinch the deal. While the deal is expected to impact the telecom market by way of increased competition in general. Vodafone would set itself aggressively by acquiring customers and increasing its market share. It would likely to have some effect on the GSM plans of Reliance Communication Ltd. (RCL). The major looser here was Reliance Comm. as the company had hoped to make a splash in the GSM space with the acquisition and this turn of events will mean a slower entry for RCL in the GSM space. Telecom sector was under selling pressure as all the stocks ended in red with VSNL leading the pack down by almost 11% while MTNL (-9%), Bharti Airtel and Reliance Comm. both down by 5%.

India?s Industrial Production (IIP) went up by 11.1% for December 2006 over the same month last year, due to strong manufacturing, capital goods and electricity output. The growth rate is higher than market expectations of 10.9%. Output growth for November was revised up to an annual 15.4%, from a previously reported 14.4%. Manufacturing production which represents more than 75% of industrial output rose by 11.9% in December from a year earlier, compared with a provisional 15.7% annual growth in November. No question about industrial and manufacturing growth...But agriculture growth is important which is a major cause of inflation. Inflation will still remain a worry unless and until Govt. take measures to ease supply side concerns.

Technically Speaking: Market traded volatile but in the red zone. Sensex rallied between the channels of 14146 ? 14529 level. However, the breadth had been in the favor of the Declines. There were 7 Declines for every 1 Advances. Volumes were decent at 4191cr. We had an extended fall and the fall seems to be stretched. A pull back rally towards the expiry is on cards. Sensex has a good support at 14040 while the Nifty has it at 4035. We could see a new high coming way post current expiry.